The World Trade Organization has revised its forecast for a rebound in global trade

The World Trade Organisation's Trade Statistics and Outlook revised its forecasts for April and June this year, reducing its previous forecast of a decline in global trade by 2020. While global trade has shown signs of rebounding from the deep recession caused by the COVID-19 outbreak, the global recovery is still likely to be undermined by the continuing effects of the epidemic, the report said.

The report predicts that the volume of world trade in goods will drop by 9.2 percent in 2020 and grow by 7.2 percent in 2021. The actual performance of global trade will depend on how the epidemic evolves and how governments respond to it. As a result, these forecasts are highly uncertain. According to the WTO's global trade forecast published in April, global trade will fall by 12.9 per cent in 2020, but current data show that this year's decline is not as large as previously forecast, with global trade showing a more optimistic trend than previously forecast. However, the report's 7.2 per cent forecast for global trade growth next year was more pessimistic than its previous forecast of 21.3 per cent. In its June global trade forecast, the WTO pointed out that next year, global trade is likely to see a "weak recovery", with global trade in goods growing by about 5 per cent, but this growth will not bring global trade back to pre-epidemic levels, let alone the so-called "rapid return to pre-epidemic levels". As a result, the latest forecast for global trade growth in 2021 looks more in line with the outlook for a "weak recovery".

The report pointed out that this year's global trade performance exceeded expectations, mainly driven by positive factors such as the easing of epidemic lockdown measures and accelerated economic activity. Global trade in June and July increased significantly and performed strongly, bringing many positive signs for the overall growth of global trade in 2020. Trade in COVID-19-related products has grown particularly strongly in recent months, demonstrating trade's ability to help governments access supplies needed to combat the epidemic. Once pent-up demand for trade is exhausted and business inventories are replenished, however, the pace of trade expansion may slow sharply. In particular, if coVID-19 rebounds in the fourth quarter of this year, more negative outcomes are likely.

While the decline in global trade during coVID-19 is similar to that during the international financial crisis of 2008-09, the economic context is very different, the report said. In the current recession, GDP has contracted much more sharply and trade has fallen more modestly. Therefore, based on market exchange rates, it is estimated that the decline in the volume of global goods trade is only about twice the decline in global GDP, which was six times during the 2008-2009 international financial crisis. This difference has a lot to do with the nature of the COVID-19 outbreak and its response policies. The embargo and travel restrictions have imposed severe supply-side constraints on national economies, significantly reducing output and employment in sectors that are usually resistant to business cycle fluctuations, particularly in non-traded services. At the same time, strong monetary and fiscal policies boosted incomes, allowing consumption and imports to rebound after the embargo was eased. Whether the global recovery can be sustained over the medium term will depend on the strength of investment and employment. If another outbreak of COVID-19 damps market confidence and forces governments to impose tougher lockdown measures, the global recovery will be undermined. Even if a vaccine or other medical treatment proves effective, its effectiveness in boosting economic and trade potential is limited.